Can Online Gambling Save Zynga?

26 Apr 2013 | 04:02 Author: Seth Shafer

Some feel social games developer Zynga is in a race against time to see if online gambling revenue can replace rapidly dwindling Farmville cash.

It wasn't all gloom and doom during Zynga's latest earnings release, with the company squeaking out a profit for the first quarter of 2013 on total revenue of $264 million. Analysts were expecting a small loss for the quarter, with strong results from "Farmville 2" helping boost performance.

Zynga's problem is that it is losing players far faster than it is gaining them from new games, with monthly active users across all of its games down to 253 million, far off the nearly 300 million monthly active users that it had a year ago in the same period.

The company rode its various 'Ville games -- FarmVille, CityVille, FrontierVille -- to much success and a billion dollar IPO but things turned grim quickly as players began to lose their appetite for the same sort of games that zynga kept pumping out (which in many cases were basically clones of other popular games).

Its purchase of OMGPOP (the maker of "Draw Something") was supposed to inject new life in the company but so far revenue gains have been non-existent although "Draw Something" remains very popular. 

Zynga was once the exclusive social games developer on Facebook but the two have since dissolved the deal, increasing the competition that Zynga faces for Facebook games and leaving it looking for a lifeline to start growing again.

Investors and the company alike have pinned their hopes largely on the introduction of real money poker and casino games. Zynga launched its first real money gambling games during the first quarter of 2013, with a partnership with seeing it roll out ZyngaPlusPoker and ZyngaPlusCasino to players 18 and over in the UK.

Zynga's play money poker game Zynga Poker remains popular and generates steady revenues but the upside for it is limited. Tapping into real money gambling markets could produce a huge shot in the arm and new growth for the company but it faces many obstacles in realizing that ambition.

Competition is strong in the online gambling space and Zynga has yet to prove that it can convince its legions of FarmVille addicts to put down their virtual pitchforks and give real money gambling a spin instead.

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